ePlanet has an eight-step procedure for due diligence before making an investment decision, and at any stage we may make a decision not to invest.

1) Read Plan/Assess Team. We request a business plan description and complete resumes of management from all entrepreneurs. The General Partners meet with the best of these entrepreneurs, attempting to identify key traits that have been associated with entrepreneurial success in the past, such as high energy, a must-win attitude, intellectual brilliance, high personal integrity, relevant experience, a strong work ethic, and the ability to prioritize and focus.

2) Evaluate Market. In addition to our reliance on our own experience, ePlanet has developed relationships with many market experts, including CEOs and other key employees of many successful companies in the technology arena. Each of these contacts represents a valuable source of information about his or her own market, and we call upon these contacts for candid references. As we evaluate markets, we need to become convinced that a company can attain niche leadership over time.

3) Examine Business Model. We examine the models upon which business plans are built, and have developed a distinct bias toward business models calling for high gross margins and relatively low capital intensiveness. Such businesses have higher internally sustainable growth rates than most and are the best candidates for superior return on equity invested.

4) Check References. ePlanet requires each entrepreneur to supply a list of references in order that the General Partners may get a better sense of the entrepreneur's past experience, strengths, weaknesses, and work habits. ePlanet makes it a point to get references outside of this list as well, in order to avoid only "cherry-picked references." ePlanet believes that these checks are important to develop a more complete and accurate picture of the team.

5) Call Potential Customers. ePlanet makes it a practice to call a number of prospective customers to get a sense of how they might respond to the envisioned product. Early on ePlanet attempts to develop and promote a sense of customer orientation in all entrepreneurs in whom we invest.

6) Evaluate Product/Technology. As part of our analysis, we need to be convinced that the product is unique, and that use of the product does not require a substantial change in customer behavior. To evaluate technology, ePlanet does not rely on in-house expertise alone, but contacts appropriate specialists to evaluate the feasibility of developing the entrepreneur's vision. Generally, ePlanet believes that assuming technology risk is part of the job of the early stage venture capitalist.

7) Evaluate Risks/Rewards. ePlanet evaluates the pro-forma financials, the likelihood of an exit after a five to seven year holding period, and the upside and downside prospects for the company. We insist that, given realistic assumptions, we must be able to make at least 10 times, and preferably 100 times, our money on each initial investment.

8) Decide. When ePlanet decides to make an investment, the General Partners draw up a term sheet for negotiation. Valuation, board seats, requirements for additional investment, vesting schedules, salaries, and so forth are all discussed, and terms are agreed to. Generally, ePlanet will require a board seat and preferred stock. While the result of the negotiation must clearly meet our needs, we believe it is important that the needs of the entrepreneurs are also met. From the point of the investment onward, we strive to match our interests with those of the entrepreneurs so that we can work together as true business partners.